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Administration's Paper on the Update on Hong Kong Disneyland Resort

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Administration's Paper on the Update on Hong Kong Disneyland Resort LC Paper No. CB(4)998/20-21(03) For discussion on 24 May 2021 Legislative Council Panel on Economic Development Update on Hong Kong Disneyland Resort PURPOSE This paper updates Members on the operation of the Hong Kong Disneyland Resort (“HKDL”) in Fiscal Year 2020 (“FY20”), covering the period from late September 2019 to early October 20201. OVERVIEW OF FY20 BUSINESS PERFORMANCE 2. HKDL faced unprecedented challenges in FY20. Its business performance was adversely affected by the tourism downturn arising from the social unrest in the first quarter of FY20 (i.e. from late September to December 2019), and the coronavirus disease 2019 (“COVID-19”) epidemic in the remainder of FY20. As part of the Government’s anti-epidemic measures, HKDL closed its theme park for about seven months (217 days) in FY20. Under this prolonged closure, the hotels in HKDL were only able to operate at a much scaled down service level. 3. With much reduced Mainland and overseas visitors due to social unrest followed by basically a complete halt of inbound tourism due to the travel restrictions under COVID-19, HKDL relied primarily on local attendance in FY20. The park attendance in FY20 (i.e. with only five months of operation) dropped by 73% year-on-year to 1.7 million2, comprising 75%, 8% and 17% of local, Mainland and non-Mainland visitors respectively, and the average hotel occupancy in the year was 15%. As a result of the significant reduction in visitors at the resort, HKDL’s total revenue in FY20 dropped by 76% to HK$1.4 billion, as compared with that in the previous fiscal year. Notwithstanding the intensive fixed costs and labour requirements involved to maintain HKDL’s operations, HKDL endeavoured to implement various cost containment measures to sustain its financial position under 1 The fiscal year of HKDL is generally a 52-week or 53-week period with the Saturday closest to 30 September as the last day of the fiscal year. FY20 was a 53-week year, covering the period from 29 September 2019 to 3 October 2020. 2 From its opening in 2005 until the end of FY20, HKDL received over 85 million visitors cumulatively. the challenging environment, including one-day-per-week unpaid leave for all staff, cancellation and scaling down of seasonal and marketing events, etc. Despite all the efforts made, earnings before interest, taxes, depreciation and amortisation (“EBITDA”) were negative HK$1.5 billion, and a net loss of HK$2.7 billion was recorded in FY203. SERVICE PERFORMANCE 4. HKDL initially closed its park for about five months from late January 2020 in order to contain the COVID-19 outbreak and to safeguard the health of its guests and staff. While the park reopened for a month from mid-June to mid-July 2020 amidst subsiding of the local epidemic situation at that time, subsequent fluctuations of local infections led to another closure for more than two months from mid-July 2020 and it only reopened again in late September 2020. Operating under the epidemic in FY20, HKDL had implemented stringent social distancing and hygiene measures in compliance with the Government’s anti-epidemic requirements, and staff were deployed to advise and assist guests to comply with the requirements. Currently, these measures include – (a) encouraging staff to get vaccinated, and arranging its own facilities onsite for staff (except for those vaccinated) to undergo COVID-19 testing once every 14 days; (b) requiring guests to scan the “LeaveHomeSafe” QR code or register their personal information at the entrance of the park and restaurants; (c) setting up a designated station at the entrance of the park and hotels for body temperature screening of all guests and staff; (d) requiring guests to make online reservation for park admission to ensure compliance with the applicable capacity limit; (e) requiring all guests and staff to wear masks at all times within the park and hotels except when consuming food or drink at catering premises, staying within the guest rooms, etc., and maintaining social distancing at queues, restaurants, attractions, rides and theatres; and (f) providing hand sanitisers inside the resort, enhancing frequency of cleaning and sanitisation, and fulfilling specified requirements on air change or air purifiers at restaurants. 5. Given the adverse market conditions caused by social unrest in the first quarter of FY20 and almost no inbound tourism under COVID-19 in the remainder 3 In FY19, HKDL’s EBITDA was positive HK$1.1 billion, and after deducting interest, depreciation and amortisation, the net loss was HK$105 million. - 2 - of the year, HKDL could no longer rely on non-local visitors, which in normal time contribute to about two-thirds of its annual attendance, and focused on attracting local visitations throughout the year. To cater for this, HKDL launched attractive admission ticket and annual pass offers, hotel staycation packages, food and beverage vouchers at hotels, etc. for local guests. Moreover, HKDL diversified its merchandise sale channels by launching an online pre-order platform for seasonal and limited merchandise products for pick-up at the resort. All these efforts stimulated locals’ interest in visiting the park and hotels, especially under the anti- epidemic fatigue, thereby helping in some ways to sustain HKDL’s business despite the unprecedented challenges. 6. Notwithstanding the difficult operating environment, HKDL continued to maintain high-quality services in FY20. According to its guest satisfaction survey, 95% of park visitors and 92% of hotel guests rated their overall experience as “excellent”, “very good” or “good”. For the reopen period in June 2020, 97% of the guests were appreciative of the health precautionary measures implemented within the park, and 99% of them considered that they were able to have a carefree visit. Also, HKDL received 59 awards from local and international associations and publications in FY20 in recognition of its design, marketing excellence, guest service, employment relationship, and commitment to the community and the environment, bringing the total number of awards received to 846 since its opening. 7. Meanwhile, HKDL remains one of the largest employers of entertainment and performance talents in Hong Kong. In spite of the business downturn in FY20, HKDL endeavoured to preserve jobs, and employed on average more than 5 300 full-time and 1 800 part-time staff members in the year. Moreover, HKDL continued to develop its highly-skilled and quality labour force by providing nearly 140 000 hours of professional and technical training programmes during the year, including those on social distancing measures and personal health and hygiene, as well as online learning programmes to foster inclusive work environment. 8. The annual business review prepared by Hong Kong Disneyland Management Limited for FY20 is at Annex. ECONOMIC BENEFITS 9. According to survey statistics from the Hong Kong Tourism Board and operational data of HKDL, the additional spending in Hong Kong by visitors to HKDL (i.e. over and above what would have been spent in the absence of HKDL) - 3 - was HK$1.8 billion4 during the five months when the park was in operation in FY20. Taking into account both the direct and indirect value-added generated from the additional spending, HKDL brought about HK$1 billion of value-added to Hong Kong in FY20, equivalent to around 0.04% of Hong Kong’s Gross Domestic Product (“GDP”), and supported 1 900 jobs (in terms of man-years)5. Taking the past 15 years of operation together, the total value-added generated by HKDL amounted to HK$113.7 billion, equivalent to 0.31% of Hong Kong’s GDP for the same period. A total of 271 300 jobs (in terms of man-years) were also created over these years for frontline workers and the travel industry. CORPORATE SOCIAL RESPONSIBILITY 10. HKDL is committed to serving the community of Hong Kong. Although FY20 was a very challenging year for HKDL, it continued with its considerable efforts in community engagement activities. HKDL worked with more than 200 organisations to provide some 80 000 complimentary park tickets for underprivileged community members and contribute around 4 400 hours of volunteer services through its Disney VoluntEARS programme. This included the collaboration with the Committee on Home-School Co-operation for the seventh year in a row on the annual “We Did It!” ticket award scheme during the 2019/20 school year to promote family volunteerism in primary schools. In addition, during the period from May to September 2020, the Disney VoluntEARS team conducted digital storytelling and play sessions with 17 online events and more than 500 participants from Hong Kong Outlying Islands Women’s Association, Children’s Cancer Foundation and Hong Kong Children’s Hospital, to bring happiness to the children in need during the epidemic. 11. Also, HKDL has been working with the Foodlink Foundation since 2013 to help local residents in need by donating more than 205 000 meals cumulatively up to the end of FY20. In addition, HKDL donated more than 3 300 kg of chocolate in February and March 2020 to cheer up children from local families during the school closure period under COVID-19. 12. HKDL continued to offer an apprenticeship programme for the disabled. HKDL also took part in the Government’s Talent-Wise Employment Charter and Inclusive Organisations Recognition Scheme to promote an inclusive and disabled- 4 All value figures in this paragraph are at 2018 prices. 5 This is estimated based on the additional spending in Hong Kong by HKDL’s visitors in FY20 and the latest available information. In reality, HKDL maintained the employment of 5 300 full-time and 1 800 part-time staff members in FY20 as mentioned in paragraph 7 of this paper.
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